Escalade records loss after write-off

EVANSVILLE - Evansville-based Escalade saw its quarterly sales improve as compared to last year, but because of a significant accounting write-off the company ended up posting a net loss.

For the quarter ended Oct. 6, Escalade reported net sales of $34.2 million, up 19 percent as compared to the same period last year

For the nine months in the year to date net sales were $106.8 million, up 9 percent versus the same period in 2011.

The company operates two divisions. Its sporting goods division, which generates about 75 percent of Escalade's sales revenue, makes and distributes sporting goods including table tennis equipment, basketball goals and outdoor play sets. Its information security and print finishing division, which is based in Europe and operates as the Martin Yale Group, deals in products including paper folding machines and shredders.

In its third-quarter earnings report, Escalade said Martin Yale has generated lower-than-expected operating profits and cash flows for the year, "coupled with continued economic weakness in the European and Asian markets."

For these reasons, and projecting ahead for earnings over the next five years, Escalade said it decided to take a goodwill impairment loss of $13.2 million on its information security and print finishing division. It also recorded intangible asset impairment of $200,000 in this segment. The two write-downs bring goodwill for that division down to zero.

"The goodwill impairment in Information Security and Print Finishing was necessary to reflect the challenges that this segment of our business has experienced," Escalade President and Chief Executive Officer Bob Keller said in the earnings release.

Goodwill refers to the value of a company's intangible assets, including things like name recognition, good customer relations and strong reputation. When one company acquires another, the value of these things is assigned a dollar value and listed on the acquiring company's books as an intangible asset called goodwill.

For the third quarter Escalade posted a net loss of $11.5 million (85 cents per diluted share). During the same period last year the company posted a net loss of $380,000 (3 cents per diluted share).

For the year to date Escalade has posted a net loss of $8.8 million (66 cents per diluted share), as compared to a net profit of $2.3 million (17 cents per diluted share) for the same period a year earlier.

Shares of Escalade closed Wednesday on the Nasdaq market at $5.25, down 5 cents.